As I’ve noted before, the debate over “corporate inversions” — a legal maneuver in which American companies merge with firms abroad to avoid U.S. taxes on some profits — is well suited to the broader case Dems have made against the GOP this year. After all, Dems argue Republicans are beholden to “billionaires” and “special interests” who continue to “rig” the political system in their favor, through a gamed tax code and the push for a low-tax, low-regulation agenda that enriches them at the expense of ordinary Americans.
Now we may see a wave of corporate inversions just as the elections heat up this fall. In an important piece, Lori Montgomery reports that we may see “a wave of corporations renounce their U.S. citizenship over the next few months, depriving the federal government of billions of dollars in tax revenue.” So far this year a dozen U.S. companies have done this, and there’s a lot more to come:
Dozens of additional deals are in the works, according to administration and congressional officials, and other companies are quietly contemplating the move. Last month, CVS Caremark chief executive Larry Merlo met with Sen. Charles E. Schumer and urged him to act to stop the rash of expatriations. Otherwise, Schumer said that Merlo warned him, CVS “might be forced to do it, too,” to duck a total tax bill expected this year to approach 40 percent.
“There’s a huge number coming,” Schumer said in an interview. “We hear there are going to be several big announcements in August.”
As I’ve reported, Senate Dems are eying whether to hold a vote this fall on legislation that would restrict corporate inversions, and a rash of high-profile announcements could generally elevate the issue. Dems are eying measures that would raise the legal hurdle companies must clear to employ the tactic and prevent those who do from enjoying other tax incentives. But Republicans — who claim they see the practice as a problem — view the Dem approach as “punitive” and want to address it only as part of broader tax reform, which of course isn’t going to happen in this Congress.
Democrats would prefer Congressional action on inversions, and genuinely think some Republican cooperation is possible in the near term. But if not, they appear prepared to try to use it against Republicans this fall. “Republicans are trying to protect these multinational corporations that are deserting the U.S. in order to evade their tax responsibilities to the American public and to our country,” says Rep. Chris Van Hollen, adding that the issue “helps crystallize some of the differences between the parties in Washington today.”
This will further anger Republicans who are already seething about Dem rhetoric on the topic. Obama has railed against “corporate deserters,” prompting this response from one key Republican: “Inversions are bad … but the president’s rhetoric on this is just horrible.” In other words, Republicans agree this corporate tactic is bad for the country, but it’s nasty, crass political populism to point that out and demand we do something about it.
Paul Krugman has argued such rhetoric is a reasonable description of what’s happening. At any rate, this battle could hit just in time for the midterms. Dems have already used multiple Senate votes to create a blueprint to run on this fall, and this issue seems to fit in comfortably with the contrast they are trying to draw.
* DEMS VOW MASSIVE GROUND GAME THIS FALL: Dan Balz runs through all the reasons Republicans may be slightly favored to win the Senate, but also the signs that Dems just may be able to hang on. This is key:
Democrats say they are pouring more money into identifying, registering and turning out their voters than in any previous midterm election. One strategist predicted privately that what the Democrats are doing in one contested state will shock people. Still, no one will know until Election Day whether those claims about turning out voters — or Republican counterclaims that their ground game will be a major asset — are correct.
Republicans were similarly hopeful about the GOP ground game in 2006, but that didn’t pan out. I don’t know if Dems can overcome their midterm dropoff problem or not, but they are investing $60 million to find out.
* OBAMA APPROVAL SINKS AGAIN: A new NBC/WSJ poll finds Obama’s approval is down to 40 percent, a new low in NBC polling. This matters because it suggests his aggregate approval is probably in the low 40s, rather than the mid-40s, as it had appeared to be for some time. Indeed the polling average now has it at 43.2 percent — a big drag for Dems in the midterms.
* BUT REPUBLICANS FARE WORSE: The NBC poll also finds that 19 percent of Americans view the GOP favorably, and the generic ballot matchup is roughly tied, at 43 for Republicans and 42 percent for Democrats. That’s trouble for Dems, because they already face a steep midterm voter dropoff problem. But it’s not as bad as it was at this point in the cycle in 2010, when Republicans led by six points.
* ECONOMIC OPTIMISM IS ON THE RISE: One last key nugget from the new NBC poll: Fifty percent of Americans believe the economy is improving, versus 47 percent who think it is not. That’s a turnaround from December, when a majority said the economy is not improving. If the recovery does accelerate, and public sentiment continues to improve, it could help mitigate the bad political environment for Dems caused by Obama’s struggles.
* MITCH McCONNELL IN FIGHT OF HIS LIFE: Alexandra Jaffe details that Mitch McConnell is facing the toughest political race of his career, including this glimpse into how the McConnell camp is emphasizing his influence in the Senate to offset his “not my job” to create jobs gaffe:
The focus from McConnell’s campaign on the GOP leader’s influence is also an attempt to mitigate some of the damage it privately admits has been done by Grimes hammering McConnell on job creation. It acknowledges his comments, as quoted by a local paper, that economic development in the state is “not my job” have been a thorn in the senator’s side.
Also see Shane Goldmacher on how neither side wants this race to be about Alison Lundergan Grimes, with McConnell wanting it to be All About Obummer.
* OBAMA ADMINISTRATION GRAPPLES WITH DEPORTATIONS: Justin Sink has a good summary of the legal options open to Obama with respect to executive action on deportations. They range from the relatively modest (deprioritizing the removals of those with minor criminal offenses) to the more ambitious (expand the deferred deportation program to protect parents of DREAMers and U.S. citizen children).
Even though we don’t know what Obama will do or what sort of legal justification he’ll offer for it, some on the right have preemptively decided that the coming move will inevitably hasten the republic’s slide into darkness.
* AND GOP DOING ITSELF LONG-TERM DAMAGE AMONG LATINOS: A key point from Jill Lawrence:
By broadcasting such unforgiving views on immigration, Republicans have mobilized a potentially huge opposition force. No one has more at stake than the young people in school and the military who, under GOP policies, would be unable to renew their residency permits and would have to return to the shadows. Beyond that, the GOP risks energizing the 62 percent of Latinos who have an undocumented friend, relative or co-worker in the country. The issue is personal to them, and they follow it closely on Spanish-language media, where it is covered, as former Obama strategist David Plouffe put it Monday at a Politico Playbook event, “as intensively as the Super Bowl is on ESPN.”
The point that Latinos follow the Congressional debate incredibly closely is key. I would only add that Republicans have locked themselves into a position to the right of Mitt Romney’s 2012 “self deportation” stance.